In the past year, we have initiated two major projets on 1) study of protein folding mechanisms and 2) development of new methods to design new proteins. We investigated the nature of protein folding intermediates. It is well known now that many proteins fold from their unfolded (U) to the native state (N) through intermediates (I). But it is not known whether the intermediates are on-pathway (U<->I<->N) or off-pathway (I<->U<->N) due to misfolding. This is the most elusive problem in the field of protein folding. So far no example has been demonstrated to be on- or off-pathway convincingly. We have proposed a kinetic criterion that allows us to show an intermediate can be demonstrated to be on-pathway under favorable conditions. Using this criterion, we are able to show that the folding intermediates of hen egg white lysozyme are on the pathway. Currently, we are applying this kinetic criterion to cytochrome c and barnase. The traditional protein design is rational and uses solid-phase peptide synthesis to synthesize the designed proteins. But the method is limited to design small proteins. Normally, the designed proteins have the character of molten globule with correct secondary structures but not native-likehydrophobic cores. We try to apply phage display technique to design new proteins in an "irrational" way by making a library of 10 million proteins on the surface of phages. Then we select the proteins that fit the criterion of native protein. By doing so, we hope to find native-like proteins and to understand what makes them native-like. Currently, we are working on two small proteins (protein A B-domain and zinc finger) to develop selection methods and to test our ideas.